Billionaire Elon Musk‘s contentious $56 billion pay package from Tesla has been validated by the Delaware Supreme Court, saying that if the same is not done, it would leave Musk “uncompensated for his time and efforts over a period of six years”. The pay package was announced in 2018, and its value today is about $139 billion based on the price of Tesla’s stock at the close of trading on Friday, reported Reuters.
The Delware Supreme Court struck down a lower court’s order after two years, which had called the compensation deal as “unfathomable.” The ruling now assures Musk a greater control over the company, which he has said is his main concern. The shareholders recently approved a new pay package that could be worth $878 billion if Tesla meets certain targets, the report mentioned.
Reactions to Supreme Court order
The Supreme Court said a 2024 ruling that rescinded the pay package had been improper and inequitable to Musk. In the 49-page ruling, the court maintained the package was just for Musk. Reacting to the order, Gene Munster, managing partner at Tesla investor Deepwater Asset Management, said “For Elon, this is a win because he gets control faster.”
Now, if Musk opts to exercise all the stock options from the 2018 package, his stake in Tesla would grow from about 12.4% to 18.1% of an expanded share base. Tesla is currently issuing shares tied to his new pay package, although Musk has to meet performance goals for the same. This includes product development and increasing the company’s value to $8.5tn in order to cash out on those awards, according to The Guardian.
Musk reacted to the order on X, saying that he was “vindicated.”
What was the case?
The 2018 pay deal provided Musk options to acquire about 304 million Tesla shares at a deeply discounted price if the company hit various milestones, which it did, Reuters said. But Musk never collected his stock options because soon after shareholders approved the 2018 compensation, the board was sued by Richard Tornetta, an investor with nine Tesla shares.
Last year, Delaware Judge Kathaleen McCormick mentioned that Tesla’s directors were conflicted and key facts were hidden from shareholders when they voted to approve the plan. She ordered that the 2018 plan be rescinded. Musk heavily criticised the order, and said, “She has done more to damage Delaware than any judge in modern history.”
Tesla’s board had earlier warned that Musk, the world’s richest person who also leads the SpaceX and artificial intelligence startup xAI, could leave the electric car company if he did not get the pay he wanted and an increase in his voting power.